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Lufthansa misses Q3 profit estimates

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Lufthansa's logo against Frankfurt's financial district skyline. The airline on Tuesday reported adjusted earnings before interest and taxes (EBIT) of 1.35 billion euros, on higher fuel costs and customer compensation for a slew of cancelled flights.

Frankfurt

GERMANY'S biggest carrier Lufthansa will increase flights at a more modest pace than its peers this season, after higher fuel costs and customer compensation for a slew of cancelled flights caused it to miss third quarter profit estimates.

Shares in the company, which have fallen by roughly two fifths since the start of the year, opened 3.8 per cent lower, underperforming the German blue-chip DAX index which rose 0.5 per cent.

The fuel costs and compensation payments are expected to increase costs by more than one billion euros (S$1.6 billion) this year, chief executive Carsten Spohr said, while an additional 170 million euros has been paid for the now completed restructuring of its budget carrier Eurowings.

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The company on Tuesday reported adjusted earnings before interest and taxes (EBIT) of 1.35 billion euros, against expectations of 1.41 billion euros in the July-September period.

However, it maintained its guidance for the full year of a slight fall from 2017's record level of 2.97 billion euros.

"Beyond today's results, this is likely to prove a positive for the stock, given that there were significant investor expectations of a profit warning or guidance downgrade heading into the results," analysts at Bernstein said in a note to clients.

Overcapacity in the market is expected to increase price pressure again, after the insolvency of German carrier Airberlin last year lightened the situation temporarily.

Earlier this month, Ryanair chief executive Michael O'Leary said that he would push fares down by 2 per cent in the six months to March 31 on European short-haul routes, while cutting the airline's profit targets.

In contrast, Lufthansa said that on the back of higher fuel costs, ticket prices would rise next year, after having already said in the summer that it would raise ticket prices for the rest of 2018.

Lufthansa said it expects to expand capacity by 8 per cent this winter versus an anticipated 10 per cent at peers and to grow capacity by 3.8 per cent for the 2019 summer timetable.

Altogether, Lufthansa expects to hike 2019 capacity by significantly less than the 8 per cent seen this year, when it benefited from the Airberlin insolvency.

"Future growth in the air transport sector will need to pay far more regard to the capacities of the infrastructure in the air and on the ground," Mr Spohr said.

The German flagship carrier expects 900 million euros in extra expenses for fuel next year, after an increase of 850 million euros this year. It has paid out 350 million euros so far this year in compensation for late or cancelled flights. REUTERS